Affordable Care Act could shrink workforce by 900,000

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HARRISBURG, Pa. ??? If you???re single, earning less than $22,000 annually and are getting health insurance through your employer, the federal Affordable Care Act may make you reconsider showing up for work in 2014.

That???s one of the conclusions from a study released looking at another of the unseen consequences of the Obamacare.

If low-income workers are able to buy reduced-price health insurance through the new federal exchanges, there may be less of an incentive for those workers to keep or find a job, according to three researchers at the National Bureau of Economic Research, a national think tank.

???Our results appear to indicate that the soon-to-be-enacted health-care reform may cause substantial declines in aggregate employment,??? conclude researchers Craig Garthwaite, Tal Gross andMatthew Notowidigdo.

In the paper, the three academics examine the so-called ???employment lock??? phenomenon. That???s what happens when employees continue working at their current job primarily so they can earn and keep health benefits. That ???lock??? will be loosened by the new health insurance exchanges set to begin operating in 2014.

There are between 850,000 and 1.5 million childless adults in the United States who earn less than 200 percent of the federal poverty line ??? about $22,000 per year ??? and have employer-provided health insurance.  They do not qualify for public health benefits because they earn too much and have no dependents, but under the rules ??? which take effect in 2014 ??? those workers will be able to buy insurance on federal or state-based health insurance exchanges.

Because of their low-income status, they can qualify for subsidies to cover part or all of the cost of their health insurance premiums.

The new study suggests that at least some of those workers are only maintaining their jobs to keep their employer-sponsored health plans. Given the option to buy cheaper insurance through the exchanges, many may cut back on their hours or drop their jobs entirely.

???Applying our labor supply estimates directly to this population, we predict a decline in employment of between 530,000 and 940,000 in response to this group of individuals being made newly eligible for free or heavily subsidized health insurance,??? the authors wrote. ???This would represent a decline in the aggregate employment rate of between 0.3 and 0.6 percentage points from this single component of the ACA.???

Unemployment was at 7.6 percent in June.

John Davidson, a health care policy analyst at the Texas Public Policy Foundation, said there is no doubt some people will drop out of the labor force once health insurance coverage is decoupled from employment. But it may not be all bad news, he added.

???Freedom from ???employment lock??? could also have the effect of encouraging people to take economic risks, such as starting a small business or some other entrepreneurial venture,??? Davidson said.  ???If they can get health insurance elsewhere, they are likely to engage in economic activity in some other way rather than drop out of the workforce entirely.???

The federal Department of Health and Human Services on Thursday declined to comment on the study.

But employers ???already concerned about the costs associated with the Affordable Care Act ??? say this could be another bad blow.

In manufacturing heavy Wisconsin, the economic recovery from the worst recession in decades is well under way. With already tight labor markets and employers struggling to find qualified workers, Badger State business advocates say the last thing the manufacturing sector needs is a shallower labor pool.

Jeff Zriny, president and CEO of the Wausau Region Chamber of Commerce, says employers would be forced to drive up wages even higher, a scenario that could ultimately be costly for Wisconsin???s economic recovery.

???There would be an hourly wage creep that would spread through the organization, which probably could not be absorbed by the company,??? Zriny said.  ???That???s what happens when you interfere with the free market.???

Paul Gessing, president of the Rio Grande Foundation, a free market think tank based in Albuquerque, N.M., says he???s not particularly surprised by the study.

???For decades, the political left in this country has been fighting to expand Americans??? dependency on government,??? he said. ???it is no surprise that the massive expansion of government???s role in the health care sector ??? an expansion that has been coveted by the left since the Truman Administration ??? would result in fewer workers and increased dependency on government.???

The authors of the study also suggest ???far larger increases in Medicaid enrollment than are currently expected,??? due to a ripple-effect of some workers leaving their jobs. Depending on what state an individual lives in, a reduction in annual income from $22,000 to $11,000 could make them eligible for Medicaid.

Boehm is a national reporter for and can be reached at